Rethinking the national car policy

Japan's decision to take Indonesia's controversial policy on the national car, the Timor, to the World Trade Organization (WTO) panel today has concerned many parties. The Jakarta Post talks about the case to economist Mari Pangestu from the Center for Strategic and International Studies.

Question: Now that Japan has finally decided to take the case to WTO what do you expect to happen?

Answer: We will have six to nine months before a verdict. Nevertheless, if the case has reached the panel, neither party in the dispute will be allowed to take part in the process until a decision is made.

The panel, which consists of a minimum of three independent members, is given a maximum of nine months to reach a decision. Yet, if the case is very clear, they may need only a month to reach a verdict. The time needed by the panel also depends on how the panel works.

The panel's task is to evaluate arguments of both parties and pass judgment.

Q: Do they base their work only on papers (written arguments)?

A: They also use their own judgment, based on facts, precedents and the legal aspect of WTO regulations. They have to make their own investigations.

Q: Some believe that Japan will drop the case because of Indonesia's fierce reaction.

A: There is still time -- until today -- for Japan to do so, but I have no idea about the possibility. Let's say the case is still in the consultative stage, and Minister of Industry and Trade Tunky Ariwibowo is successful in last minute negotiations with Japan ... who knows?

Q: About the case itself, what do you think of it?

A: I'm not a legal expert on General Agreement on Tariffs and Trade, but I think, based on the existing facts, Indonesia's position in this case is weak. Indonesia is breaking the basic principle of nondiscrimination and the reasons for breaking it are not good enough.

There are indeed certain circumstances -- such as infant industries and temporary subsidy arguments -- under which particular countries may be allowed to skip the nondiscriminative principle.

The question is: Will the arguments be acceptable to the panel? Can they be accepted as strong-enough arguments for Indonesia to apply discriminative policies?

Q: What do you think of those arguments?

A: It will be difficult for Indonesia to use the infant industry argument. There are only a few countries which were successful in using such an argument. Besides, most countries have been avoiding using that (argument) because it is difficult to prove.

Q: Some top government officials have kept saying that the national car policy will not incur financial losses to Japan. What's your opinion?

A: I think it's not merely a case of causing financial losses. How we judge the case cannot be explained just by relating it to the country's loss or profit. It's more about principle.

If we look at it as a case which creates a precedent -- and not relating it to any other aspects and just for the sake of future policies -- the policy is primarily breaking a basic principle. Thus, if the policy goes on, other countries will be able to apply the same policy, not just in the same business sector but in other sectors as well.

In other words, if we analyze it as something that may affect the international trading system as well as the broken principle, we have to stand for the nondiscriminative principle.

The official Japanese statement -- that the case was a matter of a principle-- is indeed interesting. Regardless of it being the truth or not, and as an economist who knows what repercussions the policy may have on the international trading system, I think it's worthwhile to evaluate whether the policy breaks the trading principle.

If we want to be a member of an international trading system, that is the consequence.

Q: Are you saying that if we let the policy go, we'll create a bad precedent?

A: Yes, we could. Let's consider this a test to the system. We will probably win. Who knows? If we win, we will then be able to know why we did. Is it because we did not break the principle, or is it because there is something wrong with the principle?

That's why I prefer to analyze it from the effect of the policy on the international trading system rather than from a loss-or-profit point of view.

Q: About the policy itself, how do you see it?

A: It depends on what we expect from the policy. If we expect to be able to make our own car easier and more efficiently, probably we need to reevaluate and see if there is some other way to reach that goal. Or, if the objective of applying the policy is to give the people a cheaper type of car, we also need to rethink and see if there is some other way to gain that objective. (swa)